The Euro suffered versus the US dollar in yesterday's European trading exchanges as the Euro region faces more roadblocks, sapping demand for risk and boosting that of safe-haven currencies. The Euro Zone's permanent bailout fund, the European Stability Mechanism is facing yet another challenge as an independent member of the Irish Parliament, Thomas Pringle, assailed the legality of the region's bailout fund that has now reached the European Union Court of Justice. Adding pressure to the single currency was also the credit rating downgrades of 5 Spanish regions, sending bond yields higher at 5.463 percent. Also, investors’ willingness to buy riskier assets was eroded by downbeat US corporate earnings reports. In today's European trading exchanges, the scenario is likely to be the same on persisting worries over the global economy.
The shared currency is expected to be more on the downside in the short term due to the holding off of Spain to request for a bailout. Adding to the Euro Zone uncertainties was the statement by Prime Minister Mariano Rajoy last Friday that he remains undecided whether or not to ask for a bailout. The activation of the ESM is seen by some as a powerful tool to curb the debt crisis. But as long as Spain remains reluctant, the single currency is likely to wane. As to the ESM, Pringle assailed its legality, saying that adopting ESM would contravene the EU treaty provisions. The EU's highest court is expected to be render judgment by the end of this year. An unfavorable ruling would once again hamper efforts of the European leaders to overcome the debt crisis, and would lead to more problems for the Euro region.
Meanwhile, the US dollar is expected to rise as traders seek its safety after US companies reported weaker-than-expected quarterly earnings and lowered their expectations for the year. With investors appearing to be less willing to buy the Euro because of global economic concerns, the EUR/USD pair is expected to weaken, making a short position a viable choice in today's European trades.
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